Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92861
Authors: 
Flath, David
Year of Publication: 
2009
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 738
Abstract: 
The leading economic explanation for tipping - that is, explanation why the practice is socially beneficial, not why individuals leave tips even though it is not narrowly advantageous to them - is that it confers an incentive to provide personal services. This fits many instances in which tipping is common but does not fit the taxicab business very well. I propose a novel explanation for tipping that does fit the taxi case. It is that tipping amounts to Lindahl pricing of the services of vacant cabs (essentially, reduced waiting time), a local public good for taxi customers.
Subjects: 
tipping
taxicabs
Lindahl pricing
social norms
JEL: 
D40
D82
Document Type: 
Working Paper

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